Xref (ASX:XF1) has announced a successful half-year performance, achieving positive EBITDA and significant progress in its transition to a single Software as a Service (SaaS) platform. During the latest reporting period, founder and CEO Lee-Martin Seymour highlighted the company’s revenue growth and operational efficiency, along with the introduction of a new “metadata API” aimed at streamlining the hiring process.
For the half-year ending December 2023, Xref reported a revenue of AUD 10.2 million, which included AUD 4.2 million generated from its new platform—an increase of 58% year-on-year. The company achieved a positive EBITDA of AUD 1.3 million, indicating what Seymour termed “core profitability.” He also noted that when adjusted for a prior period’s R&D grant, underlying EBITDA grew by an impressive 900% compared to the previous corresponding period.
Transition to a Single Platform and Revenue Mix
Since 2020, Xref has been moving away from a “credit-based transactional point solution.” Seymour stated that this transition is now effectively complete, with 54% of total annual recurring revenue (ARR) now coming from the new platform. The ARR for the new platform increased by 27%, climbing from AUD 7.2 million to AUD 9.2 million between July and December 2023. This marks the first time Xref has reported that the majority of its ARR is generated from the new platform.
Seymour explained that the transition strategy included adopting a low-friction renewal model, focusing on auto-renewals and multi-year contracts, and expanding into small and mid-market clients through self-sign-up. This strategy has broadened the product’s appeal beyond recruitment teams to encompass HR and executive roles. He also noted a shift in the company’s value proposition, moving from primarily helping clients “hire more” to emphasizing “reducing turnover” and “increasing engagement” through a suite of tools, including references, background checks, and exit surveys.
During the half, Xref successfully transitioned 181 clients from its legacy platform to the new system, while welcoming 124 new clients. This brought the total number of active clients on the platform to 843, representing a 54% increase compared to the previous half. Seymour highlighted the growth in self-service and usage metrics following the introduction of enhanced roles and permissions capabilities in December, which allow clients to manage team access across products.
Sales Performance and Marketing Initiatives
The company signed 124 new clients during the half, a 57% increase compared to the same period the previous year. Seymour indicated that the average invoice amount was approximately AUD 6,300, while the client acquisition cost was around AUD 3,000. He identified key sectors for new clients, with education, healthcare, and professional services making up 60% of the new acquisitions. Notably, 22% of new clients were located in North America, and 9% of the small-to-medium business market was attracted through self-sign-up technology launched in May.
On the marketing front, Xref generated over 2,000 leads, which is a substantial 250% increase compared to the prior corresponding half. This growth was attributed to various initiatives, including content downloads, demo requests, and campaigns via the Trust Marketplace. Seymour reported that the company created a pipeline worth AUD 3.4 million rolling into the current half.
In terms of renewals, 431 clients renewed their contracts, with 43 of those renewals including upsells, totaling about AUD 1.0 million across products such as Engage and Trust Marketplace. Xref also sold approximately AUD 180,000 in “cap extensions” to about 50 clients, while deferring AUD 600,000 of renewals to future periods. Notably, 30% of renewing clients opted for either auto-renew credit card contracts or multi-year agreements, while 12% paid for multi-year contracts upfront. Despite these achievements, Seymour mentioned a revenue churn rate of around 15%, which he attributed to market pressures and increased competition.
Operational efficiency has remained a focus for Xref. The company now employs 60 individuals, including five board members. Seymour provided productivity insights, revealing an average contribution of AUD 1.2 million in annual revenue per sales team member and an impressive 127 deals closed per year per salesperson. The customer success team is reportedly handling 45,000 cases annually, with an AI agent managing 15,000 of those, thus reducing manual caseloads by 25% in the half. Xref also maintained a 99.9% uptime, a 73% employee engagement score, and a 95% employee retention rate despite workforce adjustments.
Looking ahead, Seymour emphasized the importance of Xref’s proprietary data lake, which houses 26 years of engagement data and 9 million career histories. He indicated that the upcoming metadata API would allow candidates to present reference and verification information during the application process, potentially enhancing hiring speed for employers and improving candidate applications.
Seymour outlined the company’s priorities concerning its balance sheet, with debt reduction considered a top priority. The first tranche of debt is due in February 2028, followed by a second tranche in May 2028. He confirmed that the company aims to meet its financial obligations without additional capital raises, focusing on debt retirement, AI efficiency, and continued SaaS migration.
In a leadership update, Seymour announced the appointment of a new company secretary, Camille, while expressing gratitude to outgoing secretary Robert Waring for his decade of service.
Xref Limited specializes in developing technology that automates the candidate reference process for employers across various countries, including Australia, Canada, the United Kingdom, New Zealand, and the United States. The company operates through segments focused on candidate referencing, ID verification, and engagement surveys, catering to industries such as healthcare, hospitality, construction, and government.
